Difficult decision for shareholders

Greg Easton
Greg Easton
Fisher & Paykel Appliances shareholders are facing a dilemma about whether or not to accept the takeover offer by Haier Group.

Craigs Investment Partners broker Greg Easton says sometimes the optimal decision may not offer the highest payoff. Craigs believed Haier needed FPA more than FPA needed Haier.

"If shareholders co-operate to reject the offer, there is a good chance Haier will increase the offer. But this is by no means certain," Mr Easton said.

The offer bid at $1.20 a share was a good one but not good enough relative to the independent valuation range of $1.28 to $1.57.

With Haier already a 20% shareholder, and with the acceptance guaranteed by Allan Gray Australia Pty Ltd's 17.6% shareholding, Haier needed only 12.6% more to meet its minimum shareholding, Mr Easton said.

In that instance, those rejecting the bid might end up worse off than those who accepted.

"Whether shareholders accept or reject the offer is dependent on their value system. We have upgraded our target price to reflect the takeover offer but maintain our hold rating."

Mr Easton said Craigs had difficulty seeing a controlling shareholder, after paying a premium to secure a controlling interest, managing the target company in the interest of minority shareholders.

"We expect the share price to decline post-acquisition to reflect the decline in stock liquidity and the absence of a takeover premium."

The uncertainty of whether Haier would increase the offer price and, if it did to what level, might drive some shareholders to accept or sell into the market where the share price was about $1.23, he said.

 

 

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